Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.
GST/HST Rulings Directorate
5th floor, Tower A, Place de Ville
320 Queen Street
Ottawa ON K1A 0L5
[Client Address]
Case Number: 243198
Dear [Client]:
Subject: GST/HST interpretation - Application of the GST/HST to a cottage rental website
Thank you for your correspondence of [mm/dd/yyyy], concerning the application of the goods and services tax/harmonized sales tax (GST/HST) to a cottage rental website. We apologize for the delay in this response.
The HST applies in the participating provinces at the following rates: 13% in Ontario; and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. The Government of Nova Scotia has proposed to decrease the rate of the HST from 15% to 14% effective April 1, 2025. The GST applies in the rest of Canada at the rate of 5%.
All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.
Based on the information provided […], we understand the following:
1. You are a representing […] ([…][the Company]), […].
2. [The Company] is a corporation resident in Canada and is registered for GST/HST purposes, […].
3. [The Company] provides a service to cottage owners where [the Company] performs certain activities such as listing/advertising on its website, […] (the Website), available cottages for rent in […][Canada]. [The Company] connects cottage owners with potential guests to help the owners rent their cottages for a period of time that is usually less than a month.
4. The Website describes [the Company]’s activities as follows:
[…][quote from website] (Footnote 1)
5. [the Company][’s] supplies to cottage owners are as follows:
- List the cottage with a description on [the Company]’s Website. […].
- Facilitate communications between the cottage owner and potential guests.
- Provide a template of a rental agreement […].
- Track availabilities and bookings […].
- Upload the cottage information on third party websites […].
6. [The Company] charges the cottage owners the following fees, on which [the Company] charges the GST/HST:
- An initial set up fee […]. […].
- An annual fee […].
- A commission fee […].
- Other fees charged to the owners […].
7. There is no written/signed contract between [the Company] and cottage owners regarding the commission fee. However, [the Company] sends an email to new cottage owners (“Initial Email”) in which it provides an explanation on how the commission will be charged. In addition, the Initial Email confirms that [the Company] will assist cottage owners in determining the appropriate rental price for bookings and that it is the cottage owner who makes the final decision on the rental price.
8. [The Company] does not process any payments for bookings. It is the cottage owners’ responsibility to arrange payments for bookings directly with guests. All cottage owners are paid directly by the guests via e-transfers.
9. Certain cottage owners are not registered for the GST/HST under Subdivision D of Division V of the ETA.
RULING REQUESTED
You would like to know whether [the Company] meets the definition of an excluded operator. In particular, you would like to confirm that [the Company] is not required to collect the GST/HST on taxable supplies of short-term accommodation situated in Canada that it facilitates on behalf of cottage owners that are not registered for the GST/HST.
In addition, you would like to confirm that [the Company] should continue to charge and collect the GST/HST on the commission fees and other fees charged to the cottage owners.
As noted in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, a ruling provides the Canada Revenue Agency’s (CRA) position on specific provisions of the legislation as these relate to a clearly defined fact situation of a particular person, and where all of the relevant facts and supporting documentation have been presented in writing. As we are not in possession of all of the pertinent facts, we are unable to provide a ruling. However, we are pleased to provide an interpretation of the relevant ETA provisions for your assistance.
INTERPRETATION GIVEN
I. Digital economy rules
The CRA is responsible for administering the ETA, which governs the application of the GST/HST. The ETA generally requires every registrant making a taxable supply in Canada to collect the GST/HST from the recipient and remit it to the CRA. The ETA has been amended, effective July 1, 2021, to include GST/HST provisions that generally apply to non-resident suppliers, distribution platform operators and accommodation platform operators participating in the digital economy.
Under the digital economy provisions and particularly pursuant to subsection 211.13(4), where an accommodation platform operator(Footnote 2), registered for GST/HST under Subdivision D of Division V (regular GST/HST registration), facilitates the making of supplies of short-term accommodation(Footnote 3) situated in Canada through an accommodation platform(Footnote 4), on behalf of non-registered suppliers (i.e. cottage owners), the accommodation platform operator is deemed to be the supplier of the short-term accommodation. In such circumstances, the accommodation platform operator registered under Subdivision D of Division V is required to charge, collect and remit the GST/HST on the supplies the accommodation platform has facilitated.
In addition, where the deeming rules of subsection 211.13(4) apply and where the accommodation platform operator is required to charge, collect and remit tax on the supply of short-term accommodation, the digital economy measures provide that the supply of services, made by the accommodation platform operator to the non-registered suppliers (i.e. cottage owners) in relation to the supply of short-term accommodation, is not subject to tax. An example of this may be where an accommodation platform operator charges the supplier fees or commission fees for using the accommodation platform to supply the short-term accommodation.
Non-registered suppliers would generally include small suppliers (suppliers with taxable sales that do not exceed the threshold amount of $30,000). For more information on small suppliers please refer to GST/HST Memorandum 2.2, Small suppliers.
III. The deeming rules of subsection 211.13(4)
The application of the deeming rules of subsection 211.13(4) is contingent upon the fulfilment of the following three conditions:
1. A taxable supply of short-term accommodation situated in Canada is made through an accommodation platform;
2. The supplier of short-term accommodation (cottage owner) is not registered under Subdivision D of Division V; and
3. A person registered under Subdivision D of Division V is an accommodation platform operator with respect to the particular supply of short-term accommodation.
Taxable supply of short-term accommodation situated in Canada
A supply of short-term accommodation is defined as a residential complex or a residential unit that is supplied to a recipient by way of lease, licence or similar arrangement for the purpose of its occupancy by an individual as a place of residence or lodging, if the period throughout which the individual is given continuous occupancy of the complex or unit is less than one month. If the rent charged for the supply of short-term accommodation is more than $20 per day, the supply is generally considered to be a taxable supply and the supplier is generally required to charge and collect the GST/HST on the rent.(Footnote 5) For more information please refer to GST/HST Memorandum 19.2.2, Residential Real Property - Rentals.
We understand from your letter that most cottage owners are offering their cottages for rent in [Canada], for a period of less than one month, at a rate that exceeds $20 per day. Consequently, it may be deduced that there is likely a taxable supply of short-term accommodation situated in Canada.
The term accommodation platform is defined under subsection 211.1(1) as a digital platform through which a person facilitates the making of taxable supplies of short-term accommodation situated in Canada by another person that is not registered under Subdivision D of Division V.
A digital platform(Footnote 6), such as a website, is generally considered to facilitate the supply of short-term accommodation if, for example, it lists or advertises the supply on its website, thereby allowing the supplier and the recipient to find each other, with a view to the supply of short-term accommodation being made.
The Website operated by [the Company] advertises the availability of owners’ cottages. The Website also facilitates the process of application by potential guests, who are invited to complete an application form titled “[…][Application Form]” to request the rental of a cottage. The Website provides the following description of [the Company] activities:
[…][quote from website](Footnote 7)
As demonstrated above, it would appear that [the Company], through its Website, offers a service of listing and advertising cottages to their owners.
Also, the Website seems to play a pivotal role in facilitating the connection between the cottage owner (supplier) and the guest (recipient), thereby enabling the supply to be made. In fact, through the Website, potential guests may consult the availability calendar of cottages, select their preferred cottage and submit an application by filling out an online form. This form is then transmitted to the cottage owner for review and approval.
In conclusion, the Website could be regarded as facilitating the supply of taxable short-term accommodation situated in Canada between the supplier (i.e, cottage owner that are not registered under Subdivision D of Division V) and the recipient (guest). Consequently, [the Company]’s Website would meet the definition of an accommodation platform and therefore would meet condition 1 of the application of the deeming rules of subsection 211.13(4).
Condition 2: The supplier of short-term accommodation is not registered under Subdivision D of Division V
In the present case, the cottage owner is the person that makes the taxable supply of short-term accommodation. It is understood from your letter that in certain situations some of the cottage owners are not registered under Subdivision D of Division V. Therefore, condition 2 of the application of the deeming rules of subsection 211.13(4) would appear to be met in these circumstances.
The term accommodation platform operator (APO) in respect of a supply of short-term accommodation made through an accommodation platform is defined under subsection 211.1(1) and means a person, other than the supplier or an excluded operator (Footnote 8) in respect of the supply, that:
(a) controls or sets the essential elements of the transaction between the supplier and the recipient; or
(b) if paragraph (a) does not apply to any person, is involved, directly or through arrangements with third parties, in collecting, receiving or charging the consideration for the supply and transmitting all or part of the consideration to the supplier; or
(c) is a prescribed person.
In accordance with the definition of an APO, a person (other than the supplier or an excluded operator) would be considered an APO if it meets either paragraph (a), (b) or (c) of the definition of APO. As there is currently no prescribed person, paragraph (c) does not apply.
The definition of APO is considered on a supply-by-supply basis. This means that a person may be considered an APO for one supply, but not another. To ascertain the status of [the Company], the specifics of a particular transaction involving the supplier (cottage owner), the recipient (guest), and the platform operator must be provided. As we have not been provided with a specific supply/transaction to assess, we cannot determine with certainty whether [the Company] is an APO with respect to all supplies of short-term accommodation. Nevertheless, we can provide the following guidance that may assist you in making such a determination.
3(a) A person controls or sets the essential elements of the transaction between the supplier and the recipient
Supply of short-term accommodation facilitated on [the Company]’s Website
In essence, a person would be considered to control or set the essential elements of the transaction where, for example, it provides listing services in relation to the supply of short-term accommodation and where it sets the payment terms and conditions with respect to the transaction between the supplier (cottage owner) and the recipient (guest).
According to its Website, [the Company] lists a variety of cottage homes situated in different locations. The Website explains the following:
[…][quote from website]
In the present case, it would appear that [the Company], through its Website, offers a service of listing owners’ cottages.
In addition, a person would be considered to set payment terms and conditions for the transaction between the supplier and the recipient, for example, if the person sets the rental price for the cottage or sets the payment terms and conditions between the supplier (cottage owner) and the recipient (guest).
In fact, the Initial Email transmitted to the cottage owner makes the following statement:
“the owner dictates the rental rate. […]”.
Moreover, […] [the Company]’s Website asserts that any request for a discount […] is at the cottage owner’s discretion, as outlined below:
[…][quote from website]
Furthermore, upon completion of the reservation request titled “[Application Form]” by the guest and subsequent to its submission via the Website, the responsibility falls upon the cottage owner to undertake a review and approve the application as explained below:
[…][quote from application form]
Additionally, it would appear that the cottage owner is at liberty to establish payment terms and conditions according to his own discretion. […], [the Company] provides cottage owners with the option of utilizing a rental agreement template, titled “[…][Rental Agreement]” which contains predetermined payment terms and conditions. However, it is our understanding that the cottage owner may choose to amend the clauses within the agreement or to opt for an alternative agreement. […].
[…][quote from client letter]
Finally, the signature page of that [Rental Agreement] template stipulates that the requirements set out in the agreement are those of the cottage owner […] as follows:
[…][quote from rental agreement]
In light of the aforementioned considerations, it may be inferred that the cottage owner could be the person that ultimately sets and controls the final rental price of the cottage and establishes the payment terms and conditions. While [the Company] may offer some suggestions regarding the rental price and may communicate requests for discounts, it would not appear to exercise control over the rental rate or the payment terms and conditions between the cottage owner and the guest. As a result, [the Company] would possibly not be considered to control or set the essential elements of the transaction between the supplier (cottage owner) and the recipient (guest).
Supply of short-term accommodation facilitated on third-party websites […]
As outlined in your letter, cottage owners are offered the opportunity to list their cottages on third-party websites. In such cases, you explain that [the Company] is merely acting as the designated contact person, while the authority to make decisions regarding the acceptance of prospective guests remains with the cottage owner. […].
[…][quote from client letter]
As the contracts between the third-party platforms and [the Company] were not made available, we cannot establish with certainty whether [the Company] or the third-party platform meets the definition of APO under paragraph (a) of the definition. However, if [the Company] is not the party that controls or sets the payment terms and conditions with regard to the supply between the supplier (cottage owner) and the recipient (guest), [the Company] would likely not be considered an APO according to paragraph (a) of the definition.
3(b) Any person that is involved directly or through arrangements with third parties, in collecting, receiving or charging the consideration for the supply and transmitting all or part of the consideration to the supplier
Where it is established that [the Company] does not control or set the essential elements of the transaction between the supplier (cottage owner) and the recipient (guest), a person, such as[the Company], may still be considered an APO if it is involved directly or through arrangements with third parties, in collecting, receiving or charging the consideration for the supply and transmitting all or part of the consideration to the supplier.
It is our understanding that [the Company] would seem to play no role in collecting, receiving or charging the consideration for the supply and transmitting all or part of the consideration to the supplier (cottage owner). In fact, the [Rental Agreement] stipulates that the rental fees should be transferred directly to the cottage owner by e-Transfer as outlined in the clause titled “[…]” as follows:
[…][quote from rental agreement]
Also, […] the Website explicitly states that rental fees should be remitted directly to the cottage owner as follows:
[…][quote from website]
Finally, we understand that in the circumstances where [the Company] would act as the contact person when the cottage is listed on third-party platforms such as […][a third-party website], [the Company] would possibly not be considered to be involved in processing the payments for rental fees. […].
[…][quote from client letter]
Therefore, we may infer that it is unlikely for [the Company] to meet paragraph (b) of the definition of APO. This is due to the fact that [the Company] would not appear to be a person that is involved, directly or through arrangements with third parties, in collecting, receiving or charging the consideration for the supply and transmitting all or part of the consideration to the supplier. Given that [the Company] would not appear to be within the required elements of either paragraph (a) or (b) of the definition of APO, then [the Company] would likely not meet the definition of APO. Consequently, the third condition for the deeming rules of subsection 211.13(4) would most likely not be met and as a result the deeming rules provided under that subsection 211.13(4) would not apply.
IV. Definition of Excluded Operator
[…]. Pursuant to the definition of APO in subsection 211.1(1), a person may be excluded from that definition if it is considered to be an excluded operator. In accordance with paragraph 211.1(1)(a) of the excluded operator definition, a person, with respect to a supply of short-term accommodation, would be considered an excluded operator provided it fulfills all three of the following conditions:
1. the person does not set, directly or indirectly, any of the terms and conditions under which the supply is made,
2. the person is not involved, directly or indirectly, in authorizing the charge to the recipient of the supply in respect of the payment of the consideration for the supply, and
3. the person is not involved, directly or indirectly, in the ordering or delivery of the property or in the ordering or rendering of the service.
Similar to the definition of APO, the definition of excluded operator is considered on a supply-by-supply basis. As a specific supply/transaction to assess has not been provided, it is not possible to determine with certainty whether [the Company] is an excluded operator with respect to all supplies of short-term accommodation. Nevertheless, we can provide the following information that may assist you in making such a determination.
Condition 1: The person does not set, directly or indirectly, any of the terms and conditions under which the supply is made (subparagraph (i) of the excluded operator definition)
The contract that stipulates the terms and conditions between the supplier (cottage owner) and the recipient (guest) is the [Rental Agreement]. As previously discussed in this letter, this agreement is provided by [the Company] to cottage owners and contains predetermined terms and conditions. However, it is our understanding that the cottage owner may choose to amend any clause within the agreement or may opt for an alternative agreement. Therefore, in this situation, [the Company] would likely be considered a person that does not set, directly or indirectly, any of the terms and conditions under which the supply of short-term accommodation is made.
In the circumstances where the cottage is listed on third-party websites […], you explain that [the Company] is merely acting as the main contact person and the authority to make decisions regarding the acceptance of prospective guests remains with the cottage owner. It is further explained in […][a document] that you submitted to our attention:
[…][quote from client document]
In the absence of the terms and conditions that govern the relationship between the third-party website, [the Company] and the cottage owner, it is not possible to establish whether [the Company] would be considered a person that does not set, directly or indirectly, any of the terms and conditions under which the supply is made. However, in the event that [the Company] would not be a party to the agreement between the third-party website and the cottage owner, then we would possibly be able to infer that [the Company] would not set, directly or indirectly, any of the terms and conditions under which the supply is made as provided for under subparagraph (i) of the excluded operator definition.
Condition 2: The person is not involved, directly or indirectly, in authorizing the charge to the recipient of the supply in respect of the payment of the consideration for the supply (subparagraph (ii) of the excluded operator definition)
As previously discussed in this letter, it is our understanding that [the Company] may play no role in collecting, receiving or charging the consideration for the supply and transmitting all or part of the consideration to the supplier (cottage owner). Furthermore, [the Company] would seem not to authorize the charge to the recipient of the supply of the short-term accommodation for the rental fees, as this could presumably be arranged directly between the supplier and the recipient.
In instances where the cottage is listed on third-party websites, you explain that “if a cottage is booked through […][third-party] sites, these sites deal with all of the booking” and [the Company] may act as the primary contact for the listing. You also clarify that “any booking made through a third-party site will be transacted between the renter, the third-party site and the cottage owner. At no time does [the Company] transact, or handle payments related to these, or any, bookings”.
Therefore and according to subparagraph (ii) of the excluded operator definition, it would likely be that [the Company] may be considered to be a person that is not involved, directly or indirectly, in authorizing the charge to the recipient of the supply in respect of the payment of the consideration for the supply.
Condition 3: The person is not involved, directly or indirectly, in the ordering or delivery of the property or in the ordering or rendering of the service (subparagraph (iii) of the excluded operator definition)
You explain in your letter that [the Company] does not assume responsibility for the management of the owner’s cottage. In fact, you state that “[the Company] doesn’t manage any services such as cleaning, lock box, going to the property during a cottage rental time frame, etc. All such items are the responsibility of the cottage owner.” This statement would seem to suggest that the cottage may be made available to the guest by the cottage owner and that [the Company] would not engage in this aspect of the booking. Additionally, where the cottage is listed on third-party websites, it would also be our understanding that [the Company] would not have a direct or indirect role in the management of the property. Therefore and in accordance with the provisions of subparagraph (iii) of the excluded operator definition, we would likely conclude that [the Company] would not be involved, directly or indirectly, in the ordering or delivery of the property or in the ordering or rendering of the service.
In conclusion, [the Company] may meet paragraph (a) of the definition of excluded operator because [the Company] would not dictate the terms and conditions that govern the relationship between the cottage owner and the guest, [the Company] would not authorize the charge with regard to the supply of short-term accommodation, and finally, [the Company] would not be involved in the ordering or delivery of the property or in the ordering or rendering of the service.
Based on section III and IV above, [the Company] would unlikely be required to charge, collect and remit the tax on taxable supplies of short-term accommodation situated in Canada that it facilitates on behalf of suppliers that are not registered under Subdivision D of Division V. This is due to the fact that [the Company] would unlikely meet the definition of an accommodation platform operator. In addition, [the Company] would likely meet the definition of an excluded operator which would carve it out from the APO definition.
V. Collection and remittance of the GST/HST
Nevertheless, section 165 of the ETA generally requires every recipient of a taxable supply made in Canada to pay the GST/HST on the value of the consideration paid or payable for the supply unless the supply is specifically exempt under Schedule V or zero-rated under Schedule VI. Subsection 221(1) further provides that every person who makes a taxable supply is required to collect the GST/HST that is payable by the recipient in respect of the supply and file a GST/HST return under subsection 238(1) for each reporting period of the registrant and to remit that tax in accordance with subsection 228(2).
Therefore as a GST/HST registrant, [the Company] would continue to be responsible for charging, collecting and remitting the tax on all taxable supplies that it makes in Canada other than exempt supplies. This means that [the Company] would continue to have to charge the tax on the initial setup fee, the annual fee, the commission fee, and any other taxable supplies [the Company] makes in the course of its commercial activities.
DISCLAIMER
In accordance with the qualifications and guidelines set out in GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service, the interpretation(s) given in this letter, including any additional information, is not a ruling and does not bind the CRA with respect to a particular situation. Future changes to the ETA, regulations, or the CRA’s interpretative policy could affect the interpretation(s) or the additional information provided herein.
If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 343-630-4822.
Should you have additional questions on the interpretation and application of the GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.
Sincerely,
Batoul Hassan
Senior Rulings Officer
Digital Economy Unit
General Operations and Border Issues Division
GST/HST Rulings Directorate
FOOTNOTES
1. […]
2. Under subsection 211.1(1), an “Accommodation Platform Operator” is defined as a person (other than the supplier of the short-term accommodation or an excluded operator) that controls or sets the essential elements of the transaction between the supplier of short-term accommodation and the recipient, or if no such person exists, it would be a person that is involved, directly or through arrangements with third parties, in collecting, receiving or charging the consideration for the supply of short-term accommodation and transmitting all or part of that consideration to said supplier.
3. Under subsection 123(1), a “Short-term accommodation” is defined as a residential complex or a residential unit that is supplied to a recipient by way of lease, licence or similar arrangement for the purpose of its occupancy by an individual as a place of residence or lodging, if the period throughout which the individual is given continuous occupancy of the complex or unit is less than one month.
4. Pursuant to subsection 211.1(1), an “Accommodation Platform” is defined as a digital platform through which a person facilitates the making of supplies of short-term accommodation situated in Canada by another person that is not registered under Subdivision D of Division V.
5. Conversely, paragraph 6(b) of Part I of Schedule V exempts a supply of a residential unit by way of lease, licence or similar arrangement for the purpose of its occupancy as a place of residence or lodging by an individual, where the consideration for the supply does not exceed $20 for each day of occupancy.
6. Under subsection 211.1(1), a “digital platform” includes a website, an electronic portal, gateway, store or distribution platform or any other similar electronic interface but does not include
(a) an electronic interface that solely processes payments; or
(b) a prescribed platform or interface.
7. […]
8. Section IV of this letter provides additional information on the defined term excluded operator.
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